Key facts
- New Zealand's manufacturing activity saw a significant increase in June.
- The Performance of Manufacturing Index (PMI) reached 59.7, its highest point since July 2021.
- This expansion was driven by improved sales and order books, indicating renewed business confidence.
- Despite the overall expansion, several sub-indices remained below historical averages, with four of the five main sub-indices declining.
- Businesses continue to face challenges from weak consumer demand, high living costs, and economic uncertainty.
New Zealand's manufacturing sector experienced a substantial uplift in June, with the seasonally adjusted Performance of Manufacturing Index (PMI) climbing to 59.7. This figure represents the highest level recorded since July 2021, signaling a significant expansion in activity.
The surge in the PMI is attributed to a renewed sense of confidence among businesses, bolstered by stronger sales and fuller order books. This positive shift comes after a prolonged period of subdued results.
However, despite the overall expansion indicated by the headline figure, underlying conditions remain challenging. Several sub-indices within the PMI report were in decline, and four out of the five main sub-indices remained below their historical averages. Businesses are still grappling with weak consumer demand, high living costs, and general economic uncertainty. Factors such as falling construction activity, rising input costs, and global instability are contributing to reduced orders and cash flow, with supply chain issues further exacerbating these pressures.
BNZ Senior Economist Doug Steel noted that while there is talk of an economic recovery, the current conditions are still very tough for manufacturers. The Reserve Bank of New Zealand recently maintained its cash rate target, indicating a potential for future rate cuts if inflation continues to decrease.